The drug-pricing bill that’s headed for House passage later this month will provide a modicum of relief for Medicare patients while saving taxpayers an estimated $345 billion over the next 10 years. Its core element gives the government a limited authority to negotiate drug prices.
What it doesn’t do is allow Americans to import lower-priced drugs from other countries. It doesn’t give insurers selling Medicare Part D plans the power to set formularies or otherwise restrict access. It doesn’t give the government the right to seize patents if companies refuse to negotiate.
It also doesn’t tinker with the 340B drug program. That program has come under fire in recent years for inflating in-hospital drug bills to pay for uncompensated care and special-needs programs. Critics say those should be directly funded by the government, not through the drug payment system.
The decision by top leaders in the Democratic-controlled House to limit its scope hasn’t improved its chances in the Republican-controlled Senate, which will soon face a stark political choice. Either the GOP maintains its historic fealty to Big Pharma, which remains fiercely opposed to the bill, or it can deliver something that the party’s standard bearer, who has repeatedly promised to lower drug prices, can tout as a victory on the campaign trail.
The political maneuvering should be intense. Will Senate Majority Leader Mitch McConnell ignore the bill? If not, will GOP senators like Susan Collins of Maine, Chuck Grassley of Iowa and those facing tough re-election battles join with Democrats to pass something approximating the House bill?
Or, will the Senate majority eventually pass legislation that is so watered down that it forces House Democrats to walk away in conference? What’s the point of giving a talking point to a president you despise if you can’t deliver something of real value to your constituents?
House Speaker Nancy Pelosi’s team set this stage by beating back most efforts by progressives in her caucus to expand the bill’s scope. H.R. 3 requires drug firms to engage in price negotiations. But the Pharma-friendly HHS secretary could limit that to just 25 of the most expensive drugs Medicare buys. The bill also rolls back past price increases on drugs if they were above the inflation rate, but only since 2016.
Of far more significance to seniors is the legislation’s annual cap of $2,000 in out-of-pocket costs. Many patient advocacy groups support this section of the bill, while avoiding taking a stand on the parts that would offend the drug industry.
The biggest stumbling block to winning GOP votes is the bill’s automatic maximum for negotiating prices, which would be set at 120% of a six-nation international index. The Trump administration, while never offering a formal rule, supports using foreign prices as a benchmark. Most GOP lawmakers are opposed.
The drug industry has consistently misstated facts in its campaign to defeat the bill. “Speaker Pelosi’s drug pricing plan would siphon $1 trillion or more from biopharmaceutical innovators over the next 10 years,” their ubiquitous inside-the-Beltway advertising says, even though that figure triples the Congressional Budget Office’s estimated savings.
“It would result in lower spending on research and development and thus the introduction of new drugs,” according to the Pharmaceutical Research and Manufacturers of America. The CBO weighed in on that, too, estimating there would be eight to 15 fewer new drugs over the next 10 years. That represents a 3% to 5% reduction in the usual pace of drug development.
Some legislators, rather than crumbling in the face of that evergreen argument, now say a minor dip in “innovation” is a price they’re willing to pay, especially when half of all new drugs are no better than older medicines. Congress as a whole should, too.
